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7 April 2020

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Can employees take annual leave whilst on furlough leave and what do you pay them?

Posted by: Russell Brown

As we are about to commence the Bank holiday Easter weekend, a lot of employers are keen to understand whether they can require furloughed employees to use part of their annual leave entitlement and if so, how much do they pay, 80% or 100% of salary? The concern of course being that if an employee does use part of their annual leave entitlement, this may break the continuous 3 week period of furlough leave required in order for employers to benefit from the grant made available by the government under the Coronavirus Job Retention Scheme (CJRS).

Last week ACAS issued guidance which stating: “Employees and workers must get their usual pay for bank holidays” and “Employees and workers may still be required to use a day’s paid holiday for bank holidays, including when they’re furloughed.” Both statements therefore seem to provide some clearer guidance on these two issues.

It is important to appreciate that there is no statutory right to paid annual leave on a bank holiday. An employee simply uses one of their annual leave days on a bank holiday (usually at the instruction of the employer) in just the same way as taking it on a working day (after submitting a request for annual leave). Consequently, the ACAS guidance seems to acknowledge that annual leave can be taken whilst an employee is furloughed at the request of an employer. Assuming this is the case then it gives employers some reassurance that they can request employees to use part of their annual leave entitlement whilst furloughed without breaking the continuous 3 week period of furlough leave required under the CJRS.

The above does not however give employers the green light to make employees use up all of their annual leave entitlement whilst on furlough leave. It seems that it would be safe to require them to use it on bank holidays and those periods of annual leave booked prior to the Coronavirus outbreak. As for anything beyond this, there is a logical argument that it is not necessary given the recent changes made to the Working Time Coronavirus Amendment Regulations 2020 which allow the remaining annual leave to be carried over up to 4 weeks over the next 2 years if it was not reasonably practicable to have taken it due to Coronavirus. Any annual leave taken beyond this may be more risky until we receive further guidance on the point.

In terms of pay, the options are do you pay (a) full pay (100%) including bonus and commission, (b) 80% of pay less bonus or commission or (c) average pay over the preceding 52 weeks?  ACAS guidance advises that workers must get their ‘usual pay’ for bank holidays which presumably means what they would have received had they not been furloughed. This is the safest course of action to take and whilst it requires employers to top up any remuneration above 80%, it still allows them to benefit from the CJRS grant by having 80% of any annual leave taken effectively subsidised by the government.

There is one important caveat to the above which is that the government guidance remains silent on the above points and as a result, there remains the possibility that HMRC or BEIS could announce a different viewpoint.

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Russell is a Partner and Head of Glaisyers' Employment Team.

Russell Brown - Partner

To discuss how Glaisyers can assist you contact Russell Brown on Russell.Brown@glaisyers.com or via 0161 832 4666.

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